Wednesday, March 5, 2014

Markets climb the wall of worry.

Market Talk:

The Russian / Ukrainian standoff seemed to ease yesterday as Putin made some conciliatory words about not expanding an offensive unless Russian interests are threatened by the new Government forming in the Ukraine. Well, how Russia perceives things going forward is open to question. He also raised concerns about economic sanctions by threatening to retaliate by doing things that would have a negative impact on the US dollar in world markets. All in all, the market took to the notion that the immediate threat of an all out Russian attack beyond the sea port Crimea is off the table. Who of us in the US even heard of far off places like Crimea before three weeks ago? The majority of us would likely say - where's that? But it is a peninsula that Russia apparently has strategic interests with a naval fleet there.

Part of the Ukraine seems to have Russian sentiments and part of the Ukraine wants to be part of Europe. Hmmmmm .... That's up to them to figure out. I also don't think NATO wants to get too involved at least yet. However President Obama has been doing a lot of jawboning to Putin about the Ukrainian right for self determination. We know Obama has the gift to gab but I'd have to say maybe it helped make Russia see that world repercussions in terms of sanctions could be very negative if they pursue aggressive tendencies towards the newly forming government.

That Russian propaganda machine is portraying the new Ukrainian government as fascists in their view is a troubling indicator and Putin reserves the right for future actions should they feel justified. That Putin has threatened retaliation to the US dollar is another concern.

In the meantime, the day to day market shrugged off the immediate threat just means that the Ukrainian situation will be put on the back burner in the market's view until it becomes a problem again.

In the meantime, the market looks at economic indicators for growth and corporate earnings and is back to watching fundamentals. With the market flirting at historical highs, the ongoing concerns affect the bull market in terms of corrections as each new high is reached. And thus we have see the dynamics behind the old adage that - "the market climbs a wall of worry".

When valuations are determined a bubble, the market will correct itself. In the meantime the players will play, the traders will trade and the games will go on. I'll stick to watching the fundamentals and avoid the hyped up BS that they dish out all day and night.

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